Market segmentation Market consists of large number of actual and potential customers.The process of splitting the market into different groups or segments based on the needs, characteristics or buyer behavior is called as Segmentation (Kotler, Brown, Adam, and Armstrong, 2007).Singapore Airlines (SIA) has used traditional approach adopted by legacy carriers for segmentation.
SIA focuses on business travelers and the price sensitive leisure travelers. The business paradigm of SIA has clearly differentiated these two segments by catering to their heterogonous need.
In order to penetrate their existing market and expand their revenue base they are also focusing on additional segment based on consumer loyalty. The increasing revenue of SIA has been depicted in appendix 1. Detailed analysis of segmentation strategy used by Singapore Airline is given as below: Psychographic variables Preferences: The two major groups of business and leisure travelers differ in their preferences. It’s believed that on an average in aviation industry elite travelers contribute up to 50% of revenue though they add up to less than 20% in passenger number (Brancatelli, 2009).
Hence the preference of this particular segment (Business travelers) is given additional importance. They are given exclusive in-flight service with respect to variety of cuisines being served, exotic drinks and special seating comfort (Wirtz and Johnston, 2003). At the same time since the other segment i. e. the leisure travelers form the major chunk of passengers their preferences also cannot be ignored. They too are given in-flight services which can be termed best as per industry practices.
Nature of demand: Since the nature of demand varies with respect to business and leisure travelers it is used as a parameter for discriminator analysis. Business travelers demand more working space, internet and telephone connections whereas leisure travelers demand more in-flight entertainment features (Singapore Airlines, 2009) Behavioral variables: Brand loyalty: Customer loyalty can also be used as a basis for market segmentation (Kotler et al, 2007). SIA has also segmented their market on the basis of customer loyalty.
Retaining an existing customer goes a long way in bringing in additional revenues for the company and this is exactly the reason why SIA has chosen loyalty as a variable for segmentation. SIA gives KrisFlyer and PPS club membership to their loyal customers in a bid to retain their loyalty. KrisFlyer silver group members, enjoy certain privileges such as they are allowed to fly on short notice even if the reservation is not confirmed. Similarly PPS club members are given privileges like free accident and travel insurance, increased baggage allowance etc. Singapore Airlines, 2009) Targeting Target marketing basically refers to the division of the market into various different segments and then focusing on prominent and significant key segments (Kotler et al, 2007). SIA targets customers based on lifestyle, income group and social class. Lifestyle SIA targets segments based on lifestyle (Murali and Murali, 2008). SIA ensures that customers, who give more importance to comfort and luxury, have a great experience on board. SIA places special focus on high end and discerning customers and targets customers accordingly.
Income Group Income group is also used as a parameter for targeting customers (Murali et al, 2008). SIA is a premium airline which focuses on providing value based flying experience to the customer and it comes with a heavy price tag. Hence, SIA aims to tap the high and middle income groups which are more likely to pay for quality. Social Class SIA also targets customers based on their social class. Every social class has beliefs and attitudes, which shapes their buying behavior (Kotler et al, 2007).
People belonging to the elite class will go for a high end brand, so being a luxury airline SIA targets the high social classes. Positioning Positioning can be defined as the process of framing the image of a company in the view of the target market, based on the products and services offered (Kotler et al, 2007). SIA positions itself as a premium luxury carrier. SIA portrays itself as an airline that provides all the luxuries that one may desire while travelling, be it comforts, a hospitable crew or an overwhelming in-flight experience.
The primary message used by SIA, is self explanatory; A Great Way to Fly (Singapore Airlines, 2009). The marketing strategy has been consistent all the way, the message that SIA wants to send across to the target market is that; it is the best airline in its segment. SIA joined the Star Alliance in 2000, which is the first and the largest airline alliance of its kind (Singapore Airlines, 2009). The “Singapore Girl” strategy was a very influential idea that gave SIA the push it needed and went on to become a very successful brand icon (Roll, 2009).
This brand personality of “Singapore Girl” further helps them reaffirm their position as an airline which provides high level of hospitality. Brand positioning for SIA is depicted in the diagram shown below. The strategy adapted by SIA is to position themselves as a high quality and high value brand and especially with the “Singapore Girl” concept they show the level of hospitality offered to the customers. SIA positions itself away from the competitors in every class, be it economy class, business class or first class. In the above diagram; AIQ – AirAsia ALK – Srilankan Airlines DLH – Lufthansa
SIA – Singapore Airlines In the current scenario, where premium airlines are cutting down onboard services to reduce prices in order to compete with the low-cost carriers, SIA continues to maintain their brand image. The management of SIA believes that there are customers willing to spend a good amount for quality products and services (Roll, 2009). So looking for high end customers is not an issue, rather their job is to position the brand in such a way that customers get attracted to fly on SIA, and so far SIA has been able to create, what they refer to as the Wow Effect (Wirtz et al, 2003).